50 Reasons I'm Not Sold on This Rally

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OK, so I'm no Morgan Housel or Anand Chokkavelu. I'm not going to list 100 amazing economic facts or tell you 100 of the greatest lessons I've learned over the course of my investing life (which are both unbelievably good reads, may I add), but I do love making lists. Every week I list of three stocks near 52-week highs worth selling, three near 52-week highs worth buying, three to get on your Watchlist -- in short, I love lists!

What I don't love is seeing the stock market hitting highs not seen since early May despite a steady dose of negative news. I wouldn't go so far as to call myself a Negative Nancy, but I'd definitely lump myself among the skeptics. As the market indexes rise, my skepticism is rising even faster, and here are 50 reasons why, in no particular order.

1. The unemployment rate ticked higher to 8.3% in July, the 41st consecutive month of more than 8% unemployment and considerably higher than the 5.76% average unemployment rate since 1948.

2. U.S. 10-Year Treasury notes closed the week yielding 1.58%. At that rate, it'd take about 45 years for you to double your money. Inflation figures show that prices historically double every 20 years.

3. Spain's unemployment rate rose to 24.6% in the second quarter, with youth unemployment rising to 53%.

4. Barclays (NYSE: BCS  ) , Deutsche Bank (NYSE: DB  ) , and countless other money-center banks are under investigation for deliberately fixing LIBOR rates (the interbank lending rate) for their own financial benefit. Barclays had a $456 million fine levied against it last month, while Deutsche Bank is provisioning north of $300 million to deal with potential fines.

5. Consumer spending growth dipped to 1.5% in the second quarter, the second slowest level of growth since 2009.

6. Greek unemployment levels rose to 22.5% in April, while youth unemployment actually fell to 51.5%.

7. Global crude oil demand is growing at its weakest pace since 2009.

8. The U.S. national debt is rapidly approaching $16 trillion.

9. Apple (Nasdaq: AAPL  ) widely missed Wall Street's second-quarter estimates as sequential iPhone sales fell by 9 million -- proof that every stock is fallible.

10. Wage growth is the slowest on record and is being vastly outpaced by inflation.

11. To add to the wage-growth woes, according to a recent survey by job search site Career Builder, 42% of workers report living paycheck to paycheck.

12. Revolving credit, which includes credit card spending, rose by $8 billion in May, the highest increase since November 2007.

13. China's GDP expanded by 7.6% in the second quarter, its slowest rate of increase in three years and well below its average annual expansion of 10% since 1980.

14. Worldwide mobile-phone shipments will rise by only 4% this year, their slowest growth rate since 2009.

15. The U.S. wealth gap between old and young is widening at an alarming rate. As of 2011, 37% of all U.S. households that are led by someone younger than 35 have a net worth that's either zilch or negative.

16. Despite lowering the federal funds rate to a range of 0%-0.25% in December 2008, the Case-Shiller Home Price Index has proceeded to fall 7.7% since then.

17. In 2001, families with an income below $50,000 had energy expenditures totaling 12% of their income. In 2012, that same family spent 21% of their disposable income on energy costs.

18. Spain's $125 billion bailout bought time, but its 10-year lending rate still sits at a high 6.85%.

19. United Parcel Service (NYSE: UPS  ) , a plain-view gauge of economic health, cut its earnings guidance on weaker Asian and European business.

20. In 2011, the U.S. paid China about $74 million each day (not counting holidays and weekends) in interest on the $1.1 trillion in U.S. debt it and its corporations held.

21. In the past year, the cities of Stockton, Calif., San Bernardino, Calif., Mammoth Lakes, Calif., and Harrisburg, Pa., have all filed for bankruptcy protection.

22. Since 1970, the U.S. has recorded a budget deficit every year, save for the 1998-2001 period, where President Clinton led the U.S. to four consecutive budget surpluses.

23. There were 1.046 million foreclosure filings in the first half of 2012, according to RealtyTrac -- a 2% increase over the previous six-month period.

24. U.S. manufacturing growth in July expanded at its slowest pace in 19 months.

25. Macau casino revenue grew at just 1.5% in July, its slowest growth rate since the recession in mid-2009.

26. U.S. buybacks had their third-highest year on record in 2011, while dividend yields suffer near all-time lows.

27. According to a survey conducted by Gallup in May 2012, 32% of all U.S. workers aged 18 to 29 are underemployed, the highest level since May 2011.

28. About 43% of all American families spend more than they earn.

29. Keeping in mind the rise in consumer credit discussed earlier, the average consumer credit card interest rate as of late July was 16.87%.

30. And keeping in mind that average 16.87% interest rate, total U.S. revolving credit card debt stood at roughly $870 billion as of May 2012.

31. High-yield U.S. and European corporate debt defaults recently topped 2% in July for the first time since October 2010, according to ratings agency Fitch.

32. One in six people in the United States is considered to be living in poverty, the highest level since the 1960s.

33. According to a survey conducted by Career Builder eight months ago, of the 3,000 human resources individuals it interviewed, only 23% said their company was looking to hire in 2012.

34. The average duration of unemployment is currently 38.8 weeks, up dramatically from 16.5 weeks in March 2008 and just below an all-time high.

35. The U.S. trade deficit with China in 2011 was 49,000 times as large as it was in 1985!

36. According to ZeroHedge, the nine biggest banks in the world have derivative exposure totaling nearly $229 trillion dollars! Considering JPMorgan Chase's (NYSE: JPM  ) recent $5.7 billion derivatives snafu, doesn't that make you feel safe?

37. Outstanding student-loan debt surpassed a staggering $1 trillion earlier this year despite rising default rates.

38. According to a survey from the Employee Benefit Research Institute, 29% of surveyed workers have saved less than $1,000 for retirement, with 56% having saved less than $25,000.

39. It's widely expected that Ireland's banks will need a second bailout of at least 4 billion euros to cover loan losses. This is on top of the 63 billion euros that Ireland's government has injected into the banking sector over the past three years.

40. China's private-sector PMI has fallen for nine consecutive months.

41. Since May 2011, the euro has lost about 16% of its value against the U.S. dollar. With many U.S. corporations operating overseas, negative currency translations are becoming the norm.

42. At 6%, Italy's 10-year lending rate is getting dangerously close (once again) to the 7% barrier that necessitated Greece, Portugal, Ireland, and Spain to ask for financial assistance.

43. Don't look to the U.K. for help, as Britain's household debt levels hit $2.35 trillion, their highest levels since the 1980s.

44. Between 1999 and 2009, top U.S. corporations outsourced more than 2.4 million U.S. jobs.

45. According to a survey conducted by NBC and The Wall Street Journal in late June, 61% of respondents thought the U.S. economy was headed in the wrong direction.

46. Corn prices are setting record highs, thanks to an epic drought, and threatening to push food prices even higher.

47. Through March 2012, 5.78% of all homeowners were more than 60 days late on their mortgage. What's more, the foreclosure process has widened to 631 days from notification to eventual removal.

48. A recent study conducted by JPMorgan Chase finds that U.S. state and local governments have a pension deficit totaling $3.9 trillion.

49. The U.S. debt ceiling has been raised a whopping 78 times since 1960.

50. Finally, who could forget the list I highlighted earlier this year of the dumbest ways the U.S. government is spending taxpayer money.

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Fool contributor Sean Williams has no material interest in any companies mentioned in this article. He's a sucker for a good list. You can follow him on CAPS under the screen name TMFUltraLong, track every pick he makes under the screen name TrackUltraLong, and check him out on Twitter, where he goes by the handle @TMFUltraLong.

The Motley Fool owns shares of Apple and JPMorgan Chase. Motley Fool newsletter services have recommended buying shares of, and creating a bull call spread position in, Apple. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Read/Post Comments (25) | Recommend This Article (37)

Comments from our Foolish Readers

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  • Report this Comment On August 09, 2012, at 12:28 AM, prginww wrote:

    You are good at making lists.

  • Report this Comment On August 09, 2012, at 9:59 AM, prginww wrote:

    A rally now would certainly not surprise me. I think we've all seen the 80% something odds of a rally during a presidential election at the bottom of TMF article pages for the last month. The issues you mention require long term planning and rallys are short term events. You are mixing your metaphors a bit (speaking metaphorically of course)

  • Report this Comment On August 09, 2012, at 5:45 PM, prginww wrote:

    Finally, someone who is telling it like it is, with no known braking system even close to being adequate to stop any one of them at the moment.

    Our last best hope for any near-term rescue -- so desperately needed, of course -- and the righting of this badly listing domestic ship, never mind the global fleet at large, is getting the absolute rank amateur that this once greatest and most illuminous of all nations actually elected (by far the greatest political and social scam ever perpetrated on the American people) and his band of isolated, and for the most part clueless, confederates and cronies out of Washington.

    Romney and the GOP may not win any beauty contests, or gain any added points in an overall popularity contest, but only through a near-Reaganesque revival of core free-market principles and policies, carefully enacted and judiciously carried out, will this country have a reasonable chance of coming back economically and begin wielding the power, and respect, it unequivocally should on the global financial state.

    That said, the eternal wild card that will ultimately determine our future is our overall social and cultural milieu -- those critical values, core beliefs, and shared responsibilities and sacrifices that have been, until the Baby Boomer generation grew up (if you call this growing up by previous civilized standards), the rock-solid foundation of this formerly extraordinary and unprecedented success story called the United States of America. As I said in earlier comment to an article written by a fool author (fool in small "f", because it was so out touch and out of context with both reality and the fundamental mission of the Fool, although well-written), as this foundation continues crumbling to perhaps an irredeemable state if we don't begin shaking ourselves out of this collective, mass-media-induced collective stupor, then our financial deterioration will be far from our only ongoing crisis.

    The key issues that will determine the long-term future of this country are ourselves and our determination; our genuine awareness of what's going on here and just how dire the long-range consequences really are; our understanding of history and how so many of its otherwise countless lessons can be priceless in helping us prevent the same mistakes from being made over and over; and last, but certainly not least, our self-discipline and collective discipline -- which is perhaps the most pathetic, yet among the most urgent, examples of the deterioration of all that's so vitally necessary for keeping a great nation truly great; a shining light for the rest of the world to emulate, and in so many more ways than just economic wealth and power. This once was the United States, and made this country what it once was. And until we start fighting our way back and get even part of that way, then in the long run we cannot help but remain a shadow of ourselves, and such an unnecessarily weak one at that.

    Among those key history lessons in this regard: the empire that once ruled the waves and waved the rules; that empire upon which the sun never set... yes, the same one that should be perilously close to financial bankruptcy, never mind its continuing moral deterioration if not bankruptcy, after its last great moment in that sun is over, the Olympics.

    Onward soldiers -- we have a lot of regrouping to do and many sacrifices to make, and much, much hard work ahead.

  • Report this Comment On August 09, 2012, at 5:56 PM, prginww wrote:

    I'd be more worried if there WASN'T a crisis (see 2007 or 2000).

  • Report this Comment On August 09, 2012, at 7:02 PM, prginww wrote:

    Shouldn't item 9 read "fallAble" instead of fallible ?

  • Report this Comment On August 09, 2012, at 7:30 PM, prginww wrote:


  • Report this Comment On August 09, 2012, at 8:05 PM, prginww wrote:

    Many items on the list are pure histrionics. A few are real and or serious.

    The US market is growing and is adding jobs, just not fast enough.

    Markets do not necessarily respond to real circumstances,.but to perceptions of circumstances. There is so much bad info out there at the moment, most folks are baffled about the balance of actual positive and negative circumstances.

    The US needs spending discipline and tax reform. The reform requires a broader tax base,...and fewer loop-holes, both corporate and personal, BUT definitely not higher rates.

    Unsustainable growth of soverign debt is a cancer. Folks who intentionally spread cancer should be strung up.

    The US has important domestic energy resources that could not be developed 5 years ago. They need to be developed,...NOW. And excess production needs to be exported. And the taxes on that production needs to go toward debt reduction,....not vote-buying give-away programs.

    But certain Federal aid to selected infrastructure dev,...building and repair programs (roads, bridges, rail-beds, piplines, port facilities, etc.) is justified.

    States and localities can save huge sums by cutting public education over-administration,....and keeping resources in the classrooms for the kids. There are at least 5 times more administrators than are actually needed. Leave firemen and police alone as long as they do not abuse over-time.

    All pensions, public and private, need to be sustainable.

  • Report this Comment On August 09, 2012, at 8:14 PM, prginww wrote:

    43% of US households paid zero Fed income tax in the past 3 years. 57% of HHs pay 100% of the Federal tax burden.

    This narrow of a tax base is NOT properly termed "progressivism",...this unfortunate circumstance of US 21st century public finance, is more honestly described as "paracitic".

  • Report this Comment On August 09, 2012, at 8:32 PM, prginww wrote:

    50 ways to say that nothing has actually been fixed.

  • Report this Comment On August 09, 2012, at 8:59 PM, prginww wrote:

    "...61% of respondents thought the U.S. economy was headed in the wrong direction."

    What is it we're supposed to do when others are fearful? :-)

  • Report this Comment On August 09, 2012, at 9:53 PM, prginww wrote:


    Exactly right.


    You use a lot of buzz words but they don't make much sense strung together the way you do. Long on verbiage- short on facts.

    Just one for you. Britain "lost" her empire, not by "waiving rules"(?) but by fighting two ruinous wars. Both wars were vitally necessary but were destructive of wealth, property, and most importantly, human life. It's hard to be a "trading nation" when U-Boats have sunk much of your Merchant Marine.

  • Report this Comment On August 10, 2012, at 1:04 AM, prginww wrote:

    Simple 3 step solution:

    1. Remove Germany from the Euro (as this will be the least costly and probably politically palpable).

    2. Let the ECB do to the remainder countries what our Fed does for us. Print more money at will. Currency devaluation is a good thing for them right now.

    3. Have a world wide coordinated mass stimulus injection of a quantity that drawfs the highest estimate.

    Money can go to anything that improves the country, infrastructure, or allows business to hire.

    Not till we fix the crazy unemployment problems in Europe can the world expect any kind of normalization.

  • Report this Comment On August 10, 2012, at 5:51 AM, prginww wrote:

    Compare this period in time with that of the 70's during the Carter malaise. The angst and the apathy is very similar. Until noticeable progress is made, particularly in housing, we will not turn the corner. Have we reached capitulation in this down economy?

  • Report this Comment On August 10, 2012, at 10:39 AM, prginww wrote:

    I'd rather invest when the economy looks this bad and unemployment is this high. The former can't do nothing but get better and the latter can't do nothing but go down. Great conditions for a new rally to start, you just have to wait for it. If we were living with the high growth of the 06-07, the ridiculous oil demand, and the unbelievable low unemployment, I'd be scared to buy stocks.

  • Report this Comment On August 10, 2012, at 11:27 AM, prginww wrote:


    "The former can do nothing but get better..."

    Really? How do you know that?

  • Report this Comment On August 10, 2012, at 11:43 AM, prginww wrote:

    Can't we just all agree to bring Clinton back? ;)

  • Report this Comment On August 10, 2012, at 12:21 PM, prginww wrote:

    A lot of these problems have a simple remedy - inflation. If the Fed ever gets its act together we will hopefully see inflation in the 3-4% range. That will make stocks a great asset class as compared to bonds or cash.

    Other than that, count me as a skeptic as well. It's hard to find good values currently, with even ConEd trading near 20x earnings!!

  • Report this Comment On August 10, 2012, at 12:25 PM, prginww wrote:

    Clinton mandated that banks loosen their lending rules to allow under qualified persons to receive mortgage loans. Because of this policy, the US housing market collapsed.

  • Report this Comment On August 10, 2012, at 12:26 PM, prginww wrote:

    United States imports more goods than it exports. Senior management of most domestic companies are into transferring jobs to other low wage jurisdictions (human resource arbitrage) to improve bottome lines and then importing goods back into the US to service domestic demand. US intellectual capital is being transferred to other countries because their engineers are cheaper than US engineers. China and their like are buying up US assets with the excess US dollars that the US is borrowing from these same countries to pay the interest on balance of payments deficits. The US is being hollowed out. What puzzles me is how US's visionaries (CEO's) think that by destroying US domestic economy they are helping anybody else other than themselves? They argue that for every job that gets transferred to another jurisdiction two new jobs are created in the US economy but there is no evidence to support this conjecture. They make it up as they go along and unfortunately the people that the average US citizen has installed to represent their best interests are those self same people who are allowing the "few" to screw the "many". This is not funny and can only end in no good.

  • Report this Comment On August 10, 2012, at 12:32 PM, prginww wrote:

    Ok, I think you have a few good points. Most are hysterical rubbish. The shame is that hysteria is a major component of market movement much to the delight of the "shorts".

    Just stringing together a list of disjointed facts doesn't add much to the conversation. As you said this is your reason for not buying into the rally. Enjoy your position on the sidelines...more fun in the thick of it.

  • Report this Comment On August 10, 2012, at 1:01 PM, prginww wrote:

    oh this can't be good... Ultra is gloomy about the economy, now I am really worried.

  • Report this Comment On August 10, 2012, at 1:07 PM, prginww wrote:


    I'm not on the sidelines in that I do have long-term positions that aren't being touched. Let's put it this way, I have capital to deploy, but am feeling in no rush or want to deploy with the S&P 500 over 1400.


  • Report this Comment On August 10, 2012, at 1:43 PM, prginww wrote:

    rukdng is substantially correct. Just go to Costco, read the boxes and see where our consumer goods are made. Shall we citizens sleep on until the US achieves wage parity with China? If so, the real nightmare will begin when we wake up.

    One component of the solution: Invest public funds and provide tax incentives for lasting improvements to US infrastructure, i.e., roads and bridges, a smart power grid, energy efficient architecture and good medical care. Use US companies. The additional jobs will fuel other industries, hopefully, in America.

  • Report this Comment On August 13, 2012, at 5:44 PM, prginww wrote:

    @ marctech... You say what we need is more Reaganism??? WTF???... Clinton balanced America's fiscal budget a few years after a 1993 tax increase on the rich... Let me say that again... Clinton raised taxes on the rich... Not one single Republican voted for that tax increase, and every Republican in congress said it would lead to economic catastrophe .... Reagan and Bush Sr. each cut taxes on the wealthy and quadrupled (X400%) America's taxpayer debt and yearly deficit in 12 years... W Bush cut taxes for the rich 8 times in 8 years and ended his two terms with a stock market crash of 60% and 800,000 jobs lost every month and a catastrophically increasing national debt .... We'll be digging out from under Reaganism for decades, and if Romney is elected we'll see something about 3 times as bad as the Great Depression.. That's the Great Depression that followed 12 years of Warring Harden, Calvin Coolidge, and Herbert Hoover-- three early supply siding Republicans, or you could say, Reaganists.

  • Report this Comment On August 23, 2012, at 4:15 AM, prginww wrote:


    I can't take you seriously when you refer to "Warring Harden."

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